Advancing Economic Success through Global Diversification

Home prices have actually come under pressure after a duration of strong development, with current data from the Dubai Land Department showing a drop in home loan deals and money sales. Nevertheless, we believe the danger of a long lasting migrant outflow and an extreme recession in the realty sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. Many GCC sovereigns bring fairly little debt and financing dangers are for that reason limited in the UAE, the main bank's liquidity management has actually minimized immediate concerns.

That stated, Bahrain has been able to count on support from neighbours, including Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the region since the war began. High-frequency fiscal information underscore the pressure on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

How Industrial Shifts Can Shape GCC Markets

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil earnings and a rise in spending, especially on aids, showing contingency expenses connected to the regional environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas profits to a stop, swelling the deficit spending to the biggest since 2017.

GCC inflation dynamics remain unequal, with food costs the primary source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly subdued in Saudi Arabia, most likely showing the mitigating impact of its larger domestic food production base and greater supply-chain strength.

We continue to view price pressures as mainly temporal instead of a sign of a sustained inflationary cycle. Appropriately, we expect average inflation to reduce to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume gradually, we expect the US Federal Reserve to keep rate of interest on hold till December, and regional rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which provide vital profits and FX inflows, have actually been curtailed by the United States naval blockade, while non-oil activity has actually been badly struck. In Iraq, oil exports have actually collapsed to a trickle and we're forecasting GDP to agreement by around 22% this year, with a sharp 33% rebound in 2027 as oil exports normalise.

By contrast, Syria continues to reintegrate into the international economy after more than a decade of civil war. We expect GDP growth to average 9.6% over 2026-2027, supported by renewed financial investment, particularly in banking and energy, financial reforms, and the progressive reopening of local trade links.

Positioning GCC Portfolios for 2026 Trends

The World Bank has slashed its 2026 development forecast for Middle East economies, saying total GDP growth in the area is anticipated to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and damage of energy and public facilities, had actually interfered with markets, increased monetary volatility, and compromised the 2026 growth outlook, the World Bank Group said in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.

The April 2026 World Bank's Macro Poverty Outlook anticipates that the region's aggregate (leaving out the Iran) GDP growth will slow down to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has actually been downgraded by 2.4 percentage points since the January projections, showing the negative impacts of the continuous conflict.

Saudi Arabia: Projection was devalued by 1.2 percentage points considering that January. Growth is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the greatest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has fallen by 2.7 percentage points because January.

Qatar: Especially, growth projection for the Qatari economy has seen a sharp decrease of 11.0 percentage points considering that January. The economy is now expected to tape a contraction of 5.7%, down from an approximated growth of 5.3%, due to serious obstruction to melted gas products. Qatar is a key player in the international energy market, with a worldwide market share of melted gas (LNG) supplies ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. As a result, closing the strait would indicate a complete shutdown of the nation's monetary lifeline, instantly stopping income inflows to the state budget. Bahrain: Development projection for Bahrain's economy has decreased by 1.8 portion points considering that January.